Month: April 2018

What is Systematic Transfer Plan (STP)?

Systematic Transfer Plan (STP) is a strategy where an investor transfers a fixed amount of money from one category of fund to another, usually from debt funds to equity funds. Investing a lump sum amount in stocks or equity mutual fund could be dicey for the investor as equity markets are volatile and returns in equity mutual fund is linked to the performance of stock market. Systematic Transfer Plan helps to keep a balance of risk and return.

BENEFITS OF STP

1. Consistent return – Money invested in debt fund earns interest till the time it is transferred to equity fund. The returns in debt fund are higher than returns from savings bank account and assure relatively better performance

2. Averaging of cost – STP has some integral features of systematic investment plan (SIP). Similar to SIP every month an amount is invested in an equity fund. One of the differences between STP and SIP is the source of investment. In case of the STP, money is being transferred from a debt fund and in case of SIP, from investor’s bank account. Since it is similar to SIP, STP helps in averaging out the cost of investors by purchasing fewer units at a higher NAV and more at a lower price

3. Rebalancing portfolio – An investor’s portfolio should be balanced between equity and debt. STP helps in rebalancing the portfolio by reallocating investments from debt to equity or vice versa. If investment in debt increases money can be reallocated to equity funds through systematic transfer plan and if investment in equity goes up money can be switched from equity to debt fund

How does STP work?

Say if a person wants to invest 2,40,000 amount in an equity fund through STP, he will have to first select a debt fund which allows STP to invest in that particular equity fund. After selecting the debt fund invest all the money that is 2,40,000 in the debt fund. Now you have to decide an amount which will be transferred from debt fund to equity fund and the frequency (i.e he may choose 5000 amount to be transferred in 36 installments on a monthly basis).

Every month on the fixed date amount 5000 will be transferred from the debt fund to the desired equity fund.

What are types of STP’S?

Fixed STP – In this type of Systematic Transfer Plan the transferable amount will be fixed and predetermined by the investor at the time of investment

Capital Appreciation – The capital appreciated gets transferred to the target fund and the capital part remains safe

Flexi STP – Under Flexi STP investor have a choice to transfer variable amount. The fixed amount will be the minimum amount and the variable amount depends upon the volatility in the market. If the NAV of the target fund falls investment can be increased to take benefit of falling prices and if the market moves up the minimum amount of transfer is invested to take advantage of increasing prices. Transfer facility is available on a daily, weekly monthly and quarterly interval

Using SIP Calculator-STP Calculator, To prepare a plan and illustration of your STP investment. Download Mobile app from

A PAN card issued in the name of a minor does not contain the minor’s photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature.

Information

The applicant must mention the existing PAN number in the application and check the ‘photo mismatch’ and ‘signature mismatch’ boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs.

Documents

Identity and address proof in the form of a copy of the applicant’s Aadhaar card, passport, voter ID or bank account statement should also be enclosed with the application form.

Fee

A fee of Rs 107 needs to be paid either through online banking or by credit/debit card. Alternatively, a demand draft of Rs 107 drawn in favour of NSDL-PAN must be enclosed with the application.

Process

Once the online form has been submitted, the applicant will receive an acknowledgement number. The completed application must be dispatched to the nearest NSDL or UTISL-approved centre.

The Mutual Fund Utility (MFU) provides a common platform for investors to transact across different mutual funds using a common account number (CAN). The investor is allotted a CAN as a single reference for all investments. The investor gets the benefit of a single view of all MF investments, single payment for multiple transactions, centralized complaint redressal and single point communication in case of changes in details.

Form

In order to get a CAN allotted, an investor needs to submit a duly filled CAN Registration Form at any of the nearest points of service (POS) of MF Utilities India Pvt Ltd (MFUI) or a distributor signed-up with the MFUI or a participating AMC branch. CAN forms can also be downloaded from the MFU website.

Existing investments

The existing investments of investors are not migrated by MFU. However, upon creation of a CAN, MFU will map the existing folios of the investor/s across mutual funds to the CAN, based on the PAN, holding pattern and other parameters.

Modes of holding

In case of joint holdings, a separate CAN is created for different combinations of investor holdings. CAN is provided for a combination comprising different number of investors 1, 2 or 3, order of holding, mode of holding (single, joint, anyone or survivor)and tax status.

Points to note

KYC compliance is compulsory for CAN creation.

Using SIP Calculator, To prepare a plan and illustration of your investment.
Download Mobile app from

As a first step in your financial plan, you must ensure that you have adequate health insurance for self and family members. Buying health insurance will serve the purpose of protecting financial instability and give access to quality health care.

Premium paid for health insurance also enjoys certain tax benefits in income tax act 1961 that you must know to reduce your tax liability.

Section 80D – Income tax benefit on health insurance

While calculating your taxable income for a financial year, premium paid during that year for the health insurance policy can be claimed as tax deduction under section 80D of income tax act 1961.

Please remember that tax benefit available under section 80D is over and above the limit of Rs 1, 50,000 as specified under section 80C.

In order to claim tax deduction under section 80D, you need to pay the premium either through a cheque or credit card as cash payment does not qualify for tax deduction under this section.

Under section 80D, you can avail tax deduction up to Rs 25,000. If its for a senior citizen then tax deduction will be up to Rs 50,000 (FY 18-19).

Medical expenses incurred by you on the treatment of your relative suffering from a specified diseases like AIDS, Parkinson’s, chronic renal failure, malignant cancers, thalassemia, haematological disorders, dementia and other specified neurological diseases can claim tax deduction of Rs 40,000 under section 80DDB.

For a senior citizen and very senior citizen, tax deduction limit is Rs 1,00,000 (FY 18-19).

Section 80U – Tax Deduction for Self Suffering from disability

If you are suffering from any disability then tax deduction can be claimed under section 80U of income tax act 1961. If your disability is not less than 40% then tax deduction of Rs 75,000 can be claimed. If disability is 80% or above then you can claim a higher deduction of Rs 1,25,000.

Using Income Tax Calculator, To calculate and Optimize you tax outgo. Download Mobile app from

SCSS is for senior citizens who are 60 years or above on the date of opening of the account. Also people with 55 years of age who have retired by VRS can open SCSS within one month of receiving the retirement benefits.

Minimum Investment: Rs. 1,000
Maximum Investment: Rs. 15 Lakhs

The joint account can be opened only with your spouse. There is no age limit applicable for the joint account holder.

The interest is paid out quarterly. The interest is 8.3% w.e.f July 1, 2017

No partial withdrawal is permitted before 5 years. The account may be extended for a further period of 3 Years

Advantages

The interest is paid quarterly to the saving account, hence can serve as regular income for retired

Redemption on maturity comes directly to your bank account or through post-dated cheques

The SCSS carries a sovereign guarantee for principal and interest payments. So it’s the safest investment

Disadvantages

The interest from SCSS is taxable

Bank would deduct TDS if the total interest in a year is over Rs 10,000

NRIs and HUF are not eligible to open an account

Tips

You can open SCSS with Post offices, or nationalized bank

SCSS account can be closed after 1 Year (with penalty)

If your income is not taxable, you can provide form 15H or 15G so that banks don’t cut TDS

Any retired Defence Services personnel is eligible for SCSS irrespective of his age

Many investors build portfolios of bonds, deposits, equity shares and mutual funds. When faced with an unexpected requirement, they feel unsure about whether to raise funds or liquidate investments. They are also worried about rebuilding the asset. Loan against securities a facility offered by banks and non-banking finance companies, can serve as a good alternative.

Collateral
Banks provide a complete list of approved securities against which they are willing to offer a loan. A lien is created against these securities in order for the loan to be taken. The value of loan is a percentage of the value of the securities, which can be anywhere between 50% (for equity shares), and 90% (for bank deposits).

Process
A current account with overdraft facility is opened and a borrowing limit is set based on the value of the collaterals. Investors can draw from the account whenever they choose, and can repay it by depositing the amount back into the current account. The process is simpler and more flexible than that of an EMI-based loan.

Interest
The interest rate on an loan against securities is lower than that of a personal loan or a credit card, since it is secured by collateral. Interest is charged monthly, on the basis of the daily outstanding balance in the overdraft account.

Flexibility
Once the limit is sanctioned based on the value of the collateral, investors are free to withdraw the loan amount as needed, including through the ATM and internet banking facilities. Repayment can be made based on cash inflows at any time.

Note

An loan against securities is usually offered only to resident individuals in the given format. Check with your bank for other products if you are a HUF, NRI or any other entity.

Additional charges for overdraft account maintenance, processing and stamp duty on loan agreement are applicable to loan against securities transactions.

You may need to get a new PAN card if you have to update your address, or in case the existing PAN card is lost, or if the card has a old photograph which needs to be replaced. In these cases, the person already has a PAN card, but seeks a new card with updated details, or is seeking a duplicate card with the same number. The procedure is quite simple to follow.

Documentation

If there are no changes in details, no new documents except for a copy of the old card and photograph is needed. If there is no proof of existing PAN card, the application is taken on good effort basis.

Changes

If the address or any other detail needs to be modified before re-issue, the applicant should provide proof of identity and address, date of birth, along with copy of the old PAN card and photograph.

Charges

Rs 107 is payable as fee for the issue of a new PAN card. If the address for delivery of the card is international, a fee of Rs 989 is payable.

Multiple PANs

It is illegal to have more than one PAN card. If you inadvertently hold more than one card, you must quote the other PANs and submit them for cancellation.

Tracking Status of Application

You can check the status of your PAN application using Acknowledgement Number at